Blackstone increases its investments even as asset values rise

Blackstone Group is making a dent in its war chest of cash, finding opportunities even as asset values rise. The world's largest alternative asset manager put more of the money it has raised but not invested to work, leaving it with $88 billion (€75.8 billion) in the second quarter, it said.

The firm's investment capital has more than doubled since 2013, when it was $39 billion. Led by Stephen Schwarzman, Blackstone and its private equity rivals together broke fundraising records last year.

However, as asset values have risen, managers have had to search harder to find deals that can produce the big returns that attracted investors in the first place. Rather than overpaying, firms have stockpiled the dry powder, which reached an all-time high of more than $1 trillion as of June 30th, according to Preqin. “We’ve been in a fairly robust fundraising cycle with the big getting bigger,” said Gerald O’Hara, an analyst at Jefferies. “The focus is shifting more from what they can raise to how prudently they can deploy the money.”

Warehouse investment

Blackstone is investing heavily in warehouses given the growth of online sales. The firm has made acquisitions in the US, Canada, China and Japan. During the second quarter, assets under management fell about $10.2 billion to $439.4 billion from the first period.

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Blackstone's deployed $8.4 billion in the quarter. Its private equity business invested $2.6 billion. The real estate and credit units deployed $4.6 billion and $2.4 billion respectively. President Jonathan Gray said his firm doesn't feel rushed into spending its clients' money.

The firm’s economic net income, which reflects both realised and unrealised investment gains, was $1.1 billion, or 90 cent a share, Blackstone said. Shares of Blackstone gained about 5 per cent in the past 12 months to $36.23 as of Wednesday. – Bloomberg